Lafave Corporation Uses the Absorption Costing Approach to Cost-Plus Pricing

question 14

Multiple Choice

Lafave Corporation uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products.Based on budgeted sales of 79,000 units next year,the unit product cost of a particular product is $50.80.The company's selling and administrative expenses for this product are budgeted to be $1,896,000 in total for the year.The company has invested $260,000 in this product and expects a return on investment of 15%. The markup on absorption cost for this product would be closest to:

• A)62.2%
• B)15.0%
• C)47.2%
• D)48.2%

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Definitions:

Price Increase

A rise in the cost of goods or services, which can affect consumer purchasing behavior and inflation rates.

Smaller Package

A reduction in product size or quantity while maintaining or increasing the price, often unnoticed by consumers.

Planning Fallacy

The tendency to underestimate the time, costs, and risks of future actions while overestimating the benefits, leading to poor planning and outcomes.

"All-Nighters"

Extended work or study sessions that last throughout the night, often used to meet deadlines or prepare for exams.